The stock market crash: should you invest now?

The bottom of a stock market crash is the best time to invest, writes Thomas Carr.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As the stock market crash continues, it’s a sobering reminder that stock markets are basically just measures of investor sentiment. They reflect the future expectations of investors. That is, their expectations of economic performance and more specifically of individual businesses.

Share prices rise when investor sentiment improves and fall when it deteriorates. When share prices swing abruptly, it’s an indicator that sentiment has changed very sharply. Likewise, when share prices are only moving one way (as in a stock market crash), it shows that sentiment is firm and that investors have strong convictions.

Clearly, investor sentiment is currently very poor. In fact, it’s about as bad as I’ve ever seen it. It certainly seems a lot worse than it was during the depths of the financial crisis. Even more worrying is the fact that we don’t know how much worse things are going to get.

Should you invest £1,000 in BHP right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BHP made the list?

See the 6 stocks

Bulls and bears

Investor sentiment alternates between being bullish and bearish, mostly operating between the two. Sir John Templeton – one of the most successful investors – famously said that ‘’bull markets are born on pessimism, grow on scepticism, and die on euphoria’’.

It follows, that it’s better to invest in periods when sentiment is poor, than it is in more bullish times from a long-term performance point of view. This is mainly due to valuations.

Worsening expectations result in lower share prices and lower valuations (how much investors have to pay to own a share of a company’s profits). This is significant because valuation is the biggest indicator of future long-term performance.

From this, we can also understand that the very best time to buy is when sentiment is at its very worst. In fact, the best time to buy is when the prevailing opinion is that things can’t get any worse, that economies and businesses are set to be destroyed.

Where is the bottom?

When sentiment is at its worst, the only way for stock prices is up. This point represents the bottom of a stock market crash. After this point, either future expectations improve, or valuations become attractive, bringing investors back into the market.

Of course, it’s impossible to time the market perfectly and buy at the very bottom of a stock market crash. What’s more, at times like these, it also seems impossible to predict which way sentiment is going to move next.

But what we can do, is acknowledge that stock markets are unusually cheap, and that sentiment is atrocious. From this we can then determine that any return to anything approaching normality will likely lead to positive investment returns. This is especially the case when competing investments, such as bonds and savings, offer such poor rates of return.

However, given that both stock markets and expectations are on a sharp downward trajectory, there’s clearly a degree of risk in investing now. This is why, instead of investing one lump sum right now, I plan to slowly drip-feed it into the market, over a period of weeks or even months. This approach might not offer the best returns, but it will surely help me to sleep better at night.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Is now a good time to start investing in the stock market?

Predicting what the stock market will do in the next few weeks and months is nearly impossible. But over the…

Read more »

Close-up as a woman counts out modern British banknotes.
Investing Articles

£5,000 invested in Legal & General shares 10 years ago would have generated passive income of…

Legal & General shares are one of the highest-yielding in the FTSE 100. How much passive income could have been…

Read more »

Passive income text with pin graph chart on business table
Dividend Shares

3 world-class dividend stocks to consider for passive income

These three stocks could potentially help investors create a stable – and growing – stream of passive income in the…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Diageo’s share price plunges 43% in 2 years! Time to consider buying the dip?

With sales falling, the Diageo share price is being hit hard. But with the shares now trading near 52-week lows,…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

The GGP share price skyrockets 100%+ in 2025 – Could this be the breakout stock of the year?

With the GGP share price more than doubling in four months, can Greatland Gold continue to thrive throughout the rest…

Read more »

Illustration of flames over a black background
Investing Articles

JD Sports’ share price soars 27% in just 3 weeks – is this the hottest stock to consider buying now?

The JD Sports share price is rising rapidly as management steers the business back on track. Can this upward momentum…

Read more »

Nottingham Giltbrook Exterior
Investing Articles

The Marks and Spencer share price stumbles on a cyberattack! Is it time to panic?

A disruptive cybersecurity breach has brought down Marks & Spencer’s online store, sending the share price tumbling. Should investors be…

Read more »

piggy bank, searching with binoculars
Investing Articles

Down 32%, this FTSE stock now has a 12% dividend yield!

With one of the highest yields in the FTSE 350, is this emerging markets investment firm a screaming passive income…

Read more »